Perficient Inc

NASDAQ:PRFT

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Perficient Q1 2020 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Chairman and CEO, Mr. Jeff Davis. Thank you. Please go ahead, sir.

[Jeffrey Davis, executive]

Thank you. Good morning, everyone. This is Jeff Davis, Perficient's Chairman and CEO. With me on the telephone is Paul Martin, our CFO; and Tom Hogan, our COO. I'd like to thank you for your time this morning. We've got about 10 to 15 minutes of prepared comments. And of course, after that, we'll open up the call for questions.

Paul, will you please read the safe harbor statement?

Hey, Tom, if you've got that, could you go ahead and read it?

[Paul Martin, executive]

Okay. Can you hear me now, Jeff?

[Jeffrey Davis, executive]

Yes, I can. Okay.

[Paul Martin, executive]

Okay. Thanks, Jeff, and good morning. Some of the things we will discuss in today's call concerning future company performance will be forward-looking statements within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements. We encourage you to refer to the additional information contained in our SEC filings concerning factors that could cause these results to be different than contemplated in today's discussion.

At times during this call, we will refer to adjusted EPS, our earnings press release, including a reconciliation of certain non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles, or GAAP, as posted on our website at www.perficient.com. We have also posted a slide deck, which includes a reconciliation of certain non-GAAP guidance to the most directly comparable financial measures.

Jeff?

[Jeffrey Davis, executive]

Thanks, Paul, and once again, thanks, everyone, for joining. Pleased to be with you this morning to discuss our first quarter 2020 results and provide context around our progress, navigating through the current condition and challenges.

First, I want to start by thanking both our colleagues and our customers for the way they've responded to rapid and dramatic change. Our colleagues have demonstrated remarkable resilience. When it became clear that in-office and on-site work might jeopardize health, we enacted our business continuity plans and in a matter of days, Perficient was fully remote and ready. The transition was seamless and orderly and enabled us to continue to serve our clients with minimal disruption. As you can see from the results, the pandemic's emergence had only limited impact on our first quarter performance. I'll talk a lot about -- I talk a lot about our people being our key competitive advantage. And I think that's again been underscored by the success we've had here relative to some of our competitors.

Our clients have provided inspiration as well. With rare exception, they are resolutely powering forward with projects. We're remaining nimble in providing as much flexibility as we can as challenges arrive. But by and large, they're as committed as we are to keeping everything on track. And we're fortunate to have only modest exposure to industries like travel, leisure and entertainment that have been most dramatically impacted.

And Paul will speak to financial details shortly, but 2 very notable successes during the quarter were the growth we drove in ABR as well as offshore revenue. North American ABR at $152 was the highest it's ever been and up 2% sequentially and 4% year-over-year. We've talked for several quarters on these calls about the opportunity we have to gradually drive this higher over time to help expand margins, and we're seeing those results.

Additionally, the revenue delivered by our offshore teams grew almost 30% during the quarter, and that's on the heels of 29% in the -- or I'm sorry, 31% in the fourth quarter and 29% for the year 2019, so continued strong offshore growth. That's a pace equal to or greater than virtually all of the offshore-centric firms. And I expect we could see even more outperformance in the quarters ahead as some of our competitors continue to be challenged with issues like remote working conditions and security complications. Again, our offshore teams, like the rest of Perficient, are remote and ready and supporting our clients exactly as they have all along. In fact, we're gaining share in some accounts as other firms struggle with their capacity to support mutual customers.

On our fourth quarter call in February, we shared that January had been our strongest bookings month ever. That got Q1 off to a great start, and Tom is going to share some more details on the large deals -- larger deals with you shortly.

Finally, in late March, we were excited to complete the acquisition of Brainjocks, a $13 million Sitecore-focused firm headquartered near Atlanta, with offshore resources in Serbia. It's a great team and integration is well underway. You'll recall earlier this year, MedTouch was a Q1 acquisition as well. So we've got 2 complete for the year so far. The current climate, by the way, is not dissuading us from continuing to look for ways to supplement our organic growth with M&A. In fact, we're in late stages with an opportunity I'm very excited about and hopeful could close here during the second quarter. No guarantees, of course, but we're working toward that goal.

And with that, I'm going to turn the call back over to Paul, who will share the financial results details for the first quarter. Paul?

[Paul Martin, executive]

Thanks, Jeff. And good morning, everyone. Services revenues were $145.4 million for the first quarter of 2020, a 9% increase over the comparable prior year period. Services gross margin percentage for the first quarter March 31, 2020, excluding reimbursed expenses and stock compensation, increased 60 basis points to 38.2% compared to the prior year period. SG&A expense, excluding stock compensation, increased to $30.3 million in the first quarter of 2020 from $29.8 million in the comparable prior year period. SG&A expense, excluding stock compensation as a percentage of revenue, decreased to 20.8% from 22.3% in the first quarter of 2019. Adjusted EBITDA for the first quarter of 2020 was $23.8 million or 16.3% of revenues compared to $19.7 million or 14.7% of revenues in the first quarter of 2019. The first quarter included amortization of $3.9 million compared to $4.1 million in the prior year.

Net interest expense for the first quarter 2020 increased slightly to $1.9 million from $1.8 million in the comparable prior year period. Our effective tax rate for the first quarter of 2020 was 14.6% compared to 19.9% for the first quarter of 2019. The decrease in the effective tax rate was primarily due to the increase in tax benefits recognized related to share-based compensation deductions during the first quarter of 2020. Net income increased 28% to $9 million for the first quarter of 2020 from $7 million in the first quarter of 2019.

Diluted GAAP earnings per share increased to $0.27 a share for the first quarter of 2020 from $0.22 in the first quarter of 2019. Adjusted earnings per share increased to $0.51 a share for the first quarter of 2020 from $0.43 in the comparable prior year period. Our ending billable head count at March 31, 2020, was 3,187, including 2,941 billable colleagues and 246 subcontractors. Ending SG&A head count was 565.

Our outstanding debt, net of unamortized debt discount and deferred issuance costs at March 31, 2020, was $125.8 million. We also had $29.3 million in cash and cash equivalents as of March 31, 2020, and full access to our $125 million credit facility. Our balance sheet continues to leave us very well positioned to execute against our strategic plan.

Finally, days sales outstanding on accounts receivable increased modestly to 71 days at the end of the first quarter compared to 70 days at the end of the first quarter of 2019.

I'll now turn the call over to Tom Hogan for a little commentary behind the metrics. Tom?

[Thomas Hogan, executive]

Thanks, Paul. As Jeff mentioned earlier, overall, a solid quarter for bookings. Importantly, our pipeline remained strong. We've made tremendous strides in recent years moving upmarket, and we're now in conversations and finalist for deals that we wouldn't have been considered for even just a couple of years ago. We have several large deals we're competing on. These 8-figure opportunities are now well within our wheelhouse.

We booked 71 deals north of $500,000 during the first quarter of 2020. That compares to 65 during the fourth quarter of 2019 and 70 in the year ago period. In addition to volume, average deal size for those deals was up materially sequentially and year-over-year, more wins and larger wins.

One of the things differentiating Perficient right now is our nimbleness. We're strengthening client relationships by developing new and adapting existing digitally driven solutions that help our customers quickly respond to changing market dynamics, meet the needs of their customers and to save their businesses. As an example, in health care, we're quickly -- we quickly pivoted to help customers address the sudden surge in call center and help line activity. We worked with our partners to develop and demonstrate intelligent health care chatbot solutions that securely assess symptoms and provide immediate care recommendations while helping to reduce further spread of the virus and alleviate inundated health systems. Now looking ahead, health care providers and payers are urgently addressing revenue recovery, and we've launched marketing automation and patient engagement solutions to help the industry reengage with their patients.

Similarly, the financial services industry experienced a significant uptick in loan applications due to the federal rollout of the Payment Protection Program (sic) [ Paycheck Protection Program ], or PPP. We quickly developed multiple complementary PPP offerings to address the immediate loan intake need, and we're working to provide foundational technology for larger-term, longer-term servicing challenges. Additionally, we're working on solutions for our consumer banking clients and many other industries where payment modification programs are being put into place.

Finally, we experienced increased demand from our retail clients, looking for nimble order management systems to address supply chain challenges and give their customers options to receive their orders faster. The ability to implement streamlined product fulfillment capabilities has become a must-have necessity. As a result, we have worked with multiple retail clients to implement additional shopping options, such as ship-from-store or same-day delivery to meet the safe -- to safely meet the needs of their customers.

The theme here is rapid innovation, and it's key. And it's something Perficient is well-suited for and we continue to demonstrate daily with our customers. COVID-19 continues to disrupt industries and markets, and we're proactively partnering with our clients and through these challenges.

And with that, I'll turn things back over to Jeff to discuss the remainder of 2020. Jeff?

[Jeffrey Davis, executive]

Thanks, Tom. Well, as we indicated in the press release, out of an abundance of caution, we're withdrawing our previously provided full year revenue and earnings guidance. While we had a great Q1 and remain confident on our long-term outlook, there are simply too many uncertainties right now to forecast how the remainder of the year will evolve. We'll, of course, revisit that and reestablish projections if and when we gain enough clarity to do so. But for now, this is the prudent path.

We ended the year with great momentum, record bookings in December and January and with our business running strong. And as I mentioned at the beginning of the call, I'm proud of the way that Perficient has responded to circumstances no one envisioned as the year got underway. We're in a stronger position than many of our competitors. I expect 2020 will still be a strong year for Perficient. But like everyone else, we're reacting day-by-day right now.

So with that, operator, we can open up the call for questions.

[Operator]

[Operator Instructions] Our first question comes from Surinder Thind with Jefferies.

[Surinder Thind, analyst]

Jeff, this first question is for you. Can you walk us through the discussions that maybe you're having with clients at this stage of the crisis versus maybe about a month ago? The nature of the discussions changed maybe the comfort level of clients and stuff?

[Jeffrey Davis, executive]

Yes. I would tell you that certainly, anecdotally, things are improving gradually. We had -- going back to the -- as you've pointed, about 4 weeks ago, there were a number of clients that had kind of a knee-jerk reaction as it were. We did have a couple of outright cancellations. One has recently filed bankruptcy. But otherwise, we didn't have too much of that. There was some trimming back, but we are seeing things come back around right now. So bookings were a little slower in April, but the outlook for bookings or the forecast for May is pretty solid so -- and we're definitely getting engaged in a lot more conversations as Tom pointed out, many of which are COVID-related, actually, particularly in banking and health care, but in other areas as well. And the fact that some of our competitors have struggled has definitely given us some share. So I would say right now, 4 weeks later, things definitely are looking up and improving from where they were 4 weeks ago. Clients are talking about starting projects back up and getting reengaged.

[Surinder Thind, analyst]

That's helpful. And Paul, this next question is for you. Can you talk about what level of confidence you might need to have to be able to reimplement guidance? Like, for example, would a 5% range for revenues or something like that's wide by historical centers. Would that be tight enough in the current environment, even if you're looking out a quarter or so?

[Paul Martin, executive]

Yes. So I think, obviously, we're going to have to look at the macro environment and what we're seeing specific to our business. It's hard to put a specific number on that. I think we're going to continue to monitor what our business is doing and what's happening on a macro level and adjust accordingly.

[Jeffrey Davis, executive]

Just to add to that, I do think that as we're seeing -- as I said before, we're seeing things improve. I'm optimistic that maybe by the end of Q2, we'll have a more clear outlook. So -- but no commitment. As Paul said, it's -- obviously, that's why we pulled guidance. But I do feel like we'll know a lot more, obviously, by the end of June or even earlier.

[Operator]

Our next question comes from Mayank Tandon with Needham.

[Mayank Tandon, analyst]

Jeff, you obviously lived through the last down cycle. Could you compare and contrast what you're seeing today versus what you saw back in '08, '09? Maybe help provide some context around that? And then I have a follow-up as well.

[Jeffrey Davis, executive]

Yes. This is -- I'd say this is starkly different in terms of -- the impact is more gradual, I would say, than '08, '09, where things really unraveled quickly. And like I said, I actually see some light at the end of the tunnel here already versus then. A big reason for that, and I've talked about this a lot, that Perficient, 12 years ago, was a lot more mid-market focused than we are today. And really, again, it's our Fortune 1000 clients that are really pressing on for the most part. There's some trimming here and there, but we've had no outright cancellations. And that's a big difference from '08, '09, where there were a lot of clients that just completely stopped and outright canceled projects. We've seen very little of that, with that one exception I mentioned.

[Mayank Tandon, analyst]

Got it. And then just as a follow-up, I wanted to focus on the margin front. If we do enter a prolonged downturn where revenue declines sequentially for the next few quarters, how far can you go to cut costs and manage profitability? Would it be worthwhile? Or do you believe that would actually compromise your long-term trajectory? So maybe you could also talk about that in terms of your investment plans and priorities for the remainder of this year into next year.

[Jeffrey Davis, executive]

Yes. Good question. I think it's a balance, right, good consulting answer. So yes, we're going to work hard to preserve, if not, still expand margins. I mentioned ABR is up so that's an opportunity. And right now, we're maintaining utilization around 80%, maybe a little over. So -- and actually saw a little bit of a ramp through April. I don't know that, that's -- no guarantees on that continuing obviously. We've already talked about guidance. But yes, it's going to be a balance between, obviously, retaining the talent and resources that we need to take advantage of what I expect to be a pretty significant bounce back but at the same time, effectively managing margins. So I think we've got a really good handle on that right now and what we're going to need to do. If we need to do it, like I said, it's kind of a week-by-week basis right now.

[Paul Martin, executive]

And one thing to add to that, Mayank, as Jeff talked about in his opening comments, growth is much stronger in our global leverage centers, which have higher margins. So that's going to be a bit of a tailwind relative to all these other factors.

[Operator]

Our next question comes from Brian Kinstlinger with Alliance Global Partners.

[Brian Kinstlinger, analyst]

The 80% utilization sounds really strong in this environment and only a modest impact. But can you talk about the revenue trends in April compared to, say, March and February and so we can get a sense of how the hardest part of all companies working from home's impacting you guys? And has there been any change in May compared to April?

[Jeffrey Davis, executive]

Yes. Good question. So April was down somewhat from March. And I attribute that to what I said a little bit earlier in one of the other questions was there was sort of an immediate or knee-jerk reaction in a few areas and including the one cancellation that directly impacted April. However, as I just mentioned, April actually ramped a bit week-over-week towards the end. So again, I want to be very cautious about anything around guidance that's why we pulled it. But I would say that anecdotally, there's some positive signs as I just said. But definitely, April was down a bit off of March, but then was coming back up. So too early to know in May, by the way. We'll get our first kind of full week review of that here in a couple of days.

[Brian Kinstlinger, analyst]

Great. And then if I heard directly on the bookings side, it sounds like you're having more conversations with hospitals and banks or financial services. Hospitals obviously are quite busy, but financially, at least from the news, it sounds like they're struggling, given the lack of elective surgeries. Has this sector -- does it seem more resilient? Does it seem demand will fall given their financial health has gone down a little bit? Just maybe a sense, given that's so important to your business.

[Jeffrey Davis, executive]

Yes. Absolutely. Of course, keep in mind that the payer side is where the majority of our business comes from, but we certainly have a lot of customers on the hospital side as well, hospital systems. I've been really impressed so far, and we see no indication of any change to this, that certainly, our top client in the health sector is absolutely moving forward. And we've actually expanded our role there during COVID. Again, in some cases as competitors have struggled. In other cases, it's just simply them moving forward with a capital project. So they're cutting operating expenses and operating budgets, but they're not affecting their long-term CapEx around these strategic initiatives. And I think that's pretty consistent across the board with even other hospital systems. Most of the hospital systems we work with are really quite large. So we're typically on that CapEx side, like I said, building out strategic new solutions for them. And so far, they've seen resolute and moving forward with that. And of course, on the payer side, I think they're not really that harmed by this much at all yet because they're still collecting premiums and doling out less cash. So they're probably accumulating cash, from my view.

[Operator]

Our next question comes from Maggie Nolan with William Blair.

[Margaret Nolan, analyst]

Can you comment a little bit on your sales force and their ability to be productive and kind of execute in this environment and how that pipeline looks as you kind of adjust to that new sales reality and potentially, some projects roll off, although you're not seeing a huge wave of that yet?

[Jeffrey Davis, executive]

Tom, do you want to take that?

[Thomas Hogan, executive]

Sure. I'll say from a sales perspective, continue to be impressed with not just our sales team but our subject matter experts. We have pivoted quite easily, as I've shared earlier, regarding some of the solutions that are very here and now. As new business models and challenges rose, our team very quickly got to a, "Here's what the market needs. Here's what our client needs." And we've done a nice job of really aligning and being nimble to help drive pipeline that honestly didn't maybe exist even 60 days ago. So our sellers have been, within recent, pretty aggressive and proactive in this current environment. Our pipeline remains strong. As I mentioned, there's a couple of deals that are quite large that we're going after and finalist with and obviously no promises there, but are looking good. So our sales activity definitely slowed as we change with the client demand, but I'll say it's pretty strong right now. We've pivoted quite nicely and found some new areas to engage. And keeping in mind, we're in the digital realm, where a lot of these initiatives, as Jeff mentioned, aren't slowing down. And our clients need digital more now than ever. Obviously, no promises, and so working through a lot there, but we've seen some nice activity from our sales team and our subject matter experts.

[Margaret Nolan, analyst]

And then are there any changes to the long-term strategy that you have in place regarding how you're providing services to clients, whether that be from a geographic delivery perspective or considering remote and distributed capabilities? And then just a quick housekeeping, the organic growth rate as well.

[Jeffrey Davis, executive]

So organic growth was, I want to say, about 6% for the quarter. And in terms of long-term strategy, I think it remains intact. A couple of probably worthwhile things to note, we're about 90% remote at any given point in time. Now by remote, that for us means typically working in our offices but remote from the client. Of course, remote today means working from home. We expect that within probably 6 weeks or so, 6 to 8 weeks, we'll certainly be back in the office within a couple of weeks at a limited level and obviously, following appropriate guidelines. But I think in a couple of months, we're going to be fairly back to normal. But again, I think one of the reasons that this has been fairly seamless for us is that we're accustomed to working remotely and can do it effectively indefinitely. The clients that we work with, where we would have been on-site, were immediately accommodating and agreeable to this change. And I expect that, that will continue going forward as well as long as it needs to.

In terms of -- and I will just touch on the pipeline on your earlier question a little bit. As I said before, really not seeing cancellations. So we've seen some delays in decisions. Some things pushed off. So the pipeline is really quite large and looks quite good. If we can squeeze those delays and client starts to move forward, we could see, like I said, a very nice recovery very quickly.

[Operator]

Our next question comes from Vincent Colicchio with Barrington.

[Vincent Colicchio, analyst]

Yes. Jeff, I got into the call a little bit late, so sorry if this has been addressed. But some of your more at-risk verticals, energy, retail, leisure, are there any issues there? And on retail in particular, what portion's online versus physical stores?

[Jeffrey Davis, executive]

Yes. Good question. Really, it's almost 100% online. The one that you may have missed earlier, we did have one outright cancellation, and that client has now filed bankruptcy. That was more in the brick-and-mortar space. We're actually working with them to get more digital. But outside of that, I would say our retail business is intact. We don't have a ton of exposure to leisure or hospitality, thankfully. Actually, we've been working on changing that, but fortuitous for us that we didn't have that big exposure. We have some, and there's impact there. But sort of like the hospitals right now anyway, we see them continuing to move forward with these CapEx projects.

[Vincent Colicchio, analyst]

And then with the transition to at-home, were there any security issues? Or were things fairly seamless?

[Jeffrey Davis, executive]

No. It was completely seamless. Our IT team and all of our colleagues had done a great job in responding to what we needed to do. But more importantly, we achieved SOC 2 -- audited SOC 2 compliance last year and as a part of that, had a very robust business continuity plan that's required for that certification. And that includes a ton of security, by the way. That's a high-trust type of an environment. So that was all already in place. Everybody had laptops as laptops are encrypted, et cetera, et cetera. So all they needed was access to the VPNs, and that happened almost instantly and no issues.

[Operator]

[Operator Instructions] Our next question comes from Jack Vander Aarde with Maxim Group.

[Jack Vander Aarde, analyst]

During your prepared remarks, it was mentioned that the pipeline remains strong. I know some -- you provided some additional commentary around that. And large deals continue the positive trend. Just wondering if you could provide further color around your level of visibility for the remainder of this year relative to what your -- you guys had strong visibility or at least it sounded like last quarter. And is there any elevated risk of further contract delays and cancellations more so than you expected?

[Jeffrey Davis, executive]

That's a good question. I don't know that I have a good reference on the expected part of that, to be honest with you. So it's changing daily. But again, the pipeline does remain strong, and we're seeing some delays. At the same time, as I mentioned earlier, we're starting to see some of that improve. So probably more anecdotally, but I think we'll begin to see it in the pipeline as well.

In terms of the outlook for the rest of the year, we do have a large backlog. But still, even today, as bookings slowed a little bit in March and April -- well, primarily April, we still have probably a record backlog at the moment. So given that time is on our side, as I mentioned a minute ago, what I meant was -- or what I mean by that is that if we can get these engagements booked and clients begin to kind of lift their head up and move forward, we have time for a nice recovery despite, like I said, the sort of slower period of bookings here right now. But May is off to a good start. It's too early to really say much about May as we're only a week into it. But right now, the bookings have actually been fairly decent.

[Jack Vander Aarde, analyst]

Okay. Great. And then as a follow-up to -- related to offshore revenue, that growth remains very strong. Can you talk more -- I'm wondering if you could talk more of the drivers of this growth. For example, did offshore, see an increase in ABR similar to North America? And are there any noticeable other differences just in the market environment and near-term outlook expectations as it relates to offshore versus onshore?

[Jeffrey Davis, executive]

Yes. I think -- I would tell you this, that our offshore is growing. We're obviously concentrated or focused on making that happen. So some of that is -- or a lot of it's by design, of course, in terms of being driven by our compensation plans for our sales folks and emphasizing offshore given really 2 reasons. One, we want to be competitive. You look at some of our competitors, who I won't name, that average a bill rate of about $35 an hour, it's kind of tough to compete with when we've got a business that's balanced more towards North America at $150 an hour. So again, it's about striking that balance. But I think we've got a real advantage in offshore in that we're digital offshore. We've got digital capability offshore at very competitive rates in the $35 to $40 an hour range. To answer your question, by the way, we didn't see the same increase in ABR offshore. I think it might be up a little bit. And again, that's by design as well. We're already driving 55% gross margin for offshore. So we're going to try to hold on to that mainly and just keep driving more offshore business, supplemented -- supplementing our onshore, of course.

[Operator]

Our next question comes from Surinder Thind with Jefferies.

[Surinder Thind, analyst]

Can you provide some color on head count at this point in terms of one of the levers that you're employing in terms of like pace of hiring? How should we think about that going forward as I'm assuming hiring has significantly slowed at this point?

[Jeffrey Davis, executive]

Yes. Absolutely. This is a business that typically has a fair amount of attrition associated with it, right? We tend to run 15% to 20% voluntary attrition. We're going to see that fall off. It was still in that range in Q1, but we're certainly seeing that drop. And -- which means that we don't need to hire just for replacements and at the same time, we're not necessarily hiring for growth. We've done a fair amount of hiring up through Q1. And yes, to your point, we've kind of put the brakes on that. And as I mentioned before, it's going to be our goal to maintain that 80% utilization. Depending on how things go, that might be a little tough, but we'll still maintain into the high 70s. And again, the goal will be 80%. And we'll manage that hopefully through exactly as you described, just levering and adjusting hiring.

[Surinder Thind, analyst]

Understood. If I heard you correctly, that hiring is obviously continuing to some extent. But should we expect head count growth at this point or not in Q2?

[Jeffrey Davis, executive]

I would say no right now. I think again, with the attrition rate dropping off, we're probably going to try to hold tight where we're at, even let utilization rise a little if we need to before we do a lot of hiring. So I would say from a head count projection, at least for the next 60 days, probably not a lot of change. I'm hopeful, as I've said, that maybe in 8 weeks' time, things are picking up quite a lot. And hopefully, we'll be back to hiring quite a lot by then. But for the probably next 60 days or so, not much.

[Surinder Thind, analyst]

Understood. And then just following up on the previous question about the strength of the offshore business. Is there an opportunity here to, I guess, drive that growth higher or maybe the client appetite for being able to accept more offshore work at this point? Or how should we think about where client demand is or their willingness to kind of think about the mix at this point?

[Jeffrey Davis, executive]

Yes. No, absolutely. I think offshore will continue to grow at the pace or above the pace that it is. I do think there's an opportunity to accelerate it from 2 standpoints. One, as I mentioned earlier, I think it's no surprise or no -- I should say no secret that some of the competition has struggled there, and we've actually picked up share as a result of that. And I think more of that's going to happen. But I can tell you that the skill set and the portfolio of skills that we have offshore is pretty unique. It's digital, it's on par with their onshore counterparts so it's a hell of a value. And that's what we're demonstrating to our clients. They're gaining a lot of confidence and trust in us because when you think of offshore, you don't necessarily think of Perficient. But I think that's changing, certainly, with the existing clients that we have. We're also winning new relationships that involve offshore right out of the gate. So it's just become more and more, I think, ingrained in how we sell and how we deliver. And I expect that it will accelerate even beyond the 30% we're seeing now. Maybe not during this COVID period, but long term, I absolutely think it will accelerate beyond that and become a larger and larger component of our delivery capability.

[Operator]

And our next question comes from Brian Kinstlinger with Alliance Global Partners.

[Brian Kinstlinger, analyst]

Can you talk about, from a high level, whether Sundog, Elixiter and now, Brainjocks, are they holding up better or seeing more weakness than core Perficient business in May -- sorry, in April and early May?

[Jeffrey Davis, executive]

Yes. It's very similar, I think, to what we're experiencing in general. MedTouch has done really well. One of the things that we were excited about with MedTouch is their patient acquisition expertise. And that's pretty key right now during COVID and certainly, as we get back to more elective. One of the things that we're engaging with that team right now is with hospitals who are preparing to reopen elective surgeries. And they are keen to acquire those patients for those surgeries. So we're seeing a lot of good opportunity there. That business is doing well. Brainjocks, it's kind of early, but they're doing well and, I would say, kind of on par with how the rest of Perficient is doing.

[Brian Kinstlinger, analyst]

Great. One follow-up. I don't think it was asked, but I may have missed it. While the bill rate was fantastic, our conversations, given the current environment, are -- should we expect that to come back to maybe slightly lower? Do we think it can be stable? Do we think it can still increase in this environment? I know it's very difficult probably to tell right now. I'm just curious where conversations are heading on price right now.

[Jeffrey Davis, executive]

Yes. We're being -- we're certainly being aggressive where we feel like it's going to help the client get off the dime, to be honest with you. So yes, it wouldn't strike me if ABR came down a little bit in the near term. But I think long term, that increase will resume.

[Operator]

And our next question comes from Allen Klee with National Securities.

[Allen Klee, analyst]

In the India offshore business, to what extent is your ability to do business impacted by stay-at-home orders? And to the extent that you had created areas that had special security for special projects, which, if someone's at home, is that still allowed to be done?

[Jeffrey Davis, executive]

That's a good question, and I'm glad you asked it. The answer is interestingly, I talked about the business continuity plan. So we were already doing a work-from-home test in India before the lockdown was announced. So we just had everybody stay home. That first week, there was supposed to be a test, went extremely well. Really no -- as I said, no disruption at all. And so we were already in that mode when the lockdown order came. And so we've been remote and everybody working from home in India for that whole period. I think we're probably going on 5 weeks now, something like that. So it was really a completely seamless transition there.

[Operator]

I am not showing any further questions at this time. I would now like to turn the call back over to Jeff Davis for any closing remarks.

[Jeffrey Davis, executive]

All right. Well, thank you all for your time today. I appreciate it. And we'll look forward to talking again in 90 days, hopefully with even better news. Thank you.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.